Discussion paper // Institute of Agricultural Development in Central and Eastern Europe 20

Abstract:

The paper starts with an analysis of the decline of Russian state-subsidised all-risk crop insurance during the transition period, describes the reorganisation of Russian crop insurance started in 1997 and 1998, and compares the Russian experience with the Czech Republics strictly commercial approach to crop insurance reform. A discussion of the pros and cons of multiple-peril/all-risk crop insurance yields the result that there is no allocative justification for subsidised all-risk and multipleperil crop insurance. The subsequent discussion of alternative approaches to the design of crop insurance vindicates the Czech approach in so far as coverage is restricted to a limited number of perils. But this does not necessarily mean that the government should in all circumstances abstain from intervention in crop insurance markets. Under certain conditions compulsory insurance and subsidies can contribute to an increase in social welfare. The conclusion for Russia is that the present subsidised all-risk crop insurance scheme should be abolished and replaced with specific-risk crop insurance which offers coverage for a limited number of perils. A potential example would be insurance against the risk of yield losses by the hot and dry steppe wind sukhovei. The if and how of government intervention in crop insurance should be decided pragmatically, depending on the circumstances of the peril under consideration.